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Balancing the Books

Heretic Baseball

By

Jay Palmer

Aug. 4, 2003 12:01 a.m. ET

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Reviewed by VITO J. RACANELLI

IF AMERICA'S MOST WIDELY shared religion, otherwise known as major-league baseball, had its own Index of Forbidden Books, no doubt Michael Lewis' heretical Moneyball would be at the top. If you want to keep believing those unexamined, hundred-years-thick myths of the National Pastime -- that, for example, the bunt, the steal and the hit-and-run play are crucial to success on the diamond -- don't read this book. Crack it open, however, if you want to see what the future of baseball just might look like.

Moneyball: The Art of Winning An Unfair Game By Michael Lewis W.W. Norton; 288 pages, $24.95

For the past few years, the game's hoary majordomos, like Commissioner Bud Selig have, been on the warpath to show that small-market teams like the Milwaukee Brewers have little or no chance against big-market and high payroll clubs like the New York Yankees. Thanks to much higher stadium and television revenues, the latter, baseball's version of IBM, can unfairly attract the best players with top dollar. This is supposedly bad for baseball.

But the engaging and finely written Moneyball disputes this argument, and shows convincingly that lousy teams are more often the result of bad management decisions that lead to overpaying for the wrong kind of athletic talent.

And it's the story too, in particular, of how Billy Beane, the young Oakland A's general manager, has brought phenomenal success over the past several years to his small-market team with -- by Yankee standards -- next to no money.

As scene after scene of battles between Beane and the A's old-school scouts illustrate, his view was all about exposing the ingrained illusions created by the scouts -- typically former ballplayers themselves -- about what skills make for a good ball player. And Beane was just the kind of insider who could fight the old hands at their own game and win. Unlike most baseball GMs, Beane was an important player prospect for the New York Mets back in the 1980s, highly touted by the very same insider scout culture. His abbreviated playing career, though, fell far short of the hype and the introspective Beane drew some valuable lessons from his experiences on the field.

By dint of outside-the-batter's-box thinking, studying the wad of new and less conventionally followed player statistics, like on-base average -- and then running the whole thing through a kind of contrarian Wall Street valuation screen -- Beane and his cohorts were able to discover just what contributes to a team's plating more runs than the other guys, which is what it's all about. Then he figured out how to get it on the cheap.

Lewis gives due credit to Bill James in a chapter on the revolution in unconventional player statistics, data which James (now an adviser to the Boston Red Sox) along with other fanatics invented and collected in the 1980s.

It sounds like a semantic quibble, but their work -- and this book -- shows that the difference is key: a player's ability to avoid making an out is more valuable to a team's scoring runs than his ability to get a hit, or his batting average. Foot speed, fielding ability, even raw power is overvalued, Lewis writes, but on-base average and slugging percentage are undervalued.

In baseball, as on Wall Street, information has value.

Other teams pick players using "tried and true" and often unscientific methods. Like an undervalued stock, however, players who have an OK batting average but a high on-base percentage are typically eschewed, but Beane knew better. Result: His cheaply constructed club more often than not whipped opponents with payrolls twice or three times as large. With more than 90 wins in each of the past three seasons and several playoff appearances, the A's have paid the least amount of money per victory, astounding the baseball world.

One of Lewis' funnier quotes: "In any ordinary industry, the Oakland A's would have long since acquired most other teams and built an empire."

The book's only weakness, and it's a minor quibble, is that a couple of chapters, such as one describing the intricacies of trading players, might have limited appeal to the non-baseball fan, making the story sag somewhat in the middle.

And Moneyball doesn't answer two burning questions:

If David Bowie can float a bond, when will slugger Barry Bonds?

And, for this long-suffering Mets fan, when will Billy Beane return and get an office at Shea Stadium?

VITO RACANELLI writes the European Trader column for Barron's.

Expense This!

Gilded Age party's costly tab trips up entire cotillion of scions

Reviewed by ANN LOGUE

ON JAN. 31, 1905, James Hazen Hyde the Equitable Life Assurance Society and the founder of the Alliance Fran&ccedil;aise of the United States, hosted a fabulous costume ball for 600 of that era's Bright Young Things. Held at the fashionable Sherry's Hotel, it had trappings that Martha Stewart would approve of -- abundant flora, performances by the Metropolitan Opera, and plenty of Pol Roger '89 Champagne.

After the Ball By Patricia Beard HarperCollins; 416 pages; $25.95

The paparazzi coverage that followed, both fawning and catty, drew the attention of the board and management of the Equitable. After all, at least part of the rumored $200,000 tab for the extravaganza had been charged to the business, much as Dennis Kozlowski billed Tyco for his wife's oh-so-tasteful birthday party. A few Equitable executives, some of whom Hyde trusted implicitly, moved to get the young man ousted from the company that his father founded.

In the process, their own ugly conflicts of interest were exposed. The ensuing controversy created one of the major financial scandals of the early part of the last century, one that defeated the notoriously nasty Henry Clay Frick (he couldn't exactly call out Pinkerton detectives to murder his fellow Equitable board members, although it must have crossed his mind) while further enriching others.

In After the Ball, subtitled Gilded Age Secrets, Boardroom Betrayals, and the Party That Ignited the Great Wall Street Scandal of 1905, Patricia Beard chronicles Hyde's rise and fall. The resulting story describes the culture of an entire decade's financial class, not just the struggle for control of a life-insurance company.

While the book seems extensively researched, the core story has a certain thinness to it; financial journalism wasn't pursued then as it is now, contemporary reports carried more innuendo than fact, and at least a few of the principals were skilled at hiding their tracks.

Hyde himself left for France, where he lived out most of his days in exile as a relatively private supporter of arts and literature.

But this is not a flimsy tale. Beard fills in the gaps with details about the life these people led. She explains the history of mutual-insurance societies, which continue to have a unique place in the legal and financial structure despite rampant consolidation (including Equitable's acquisition by AXA, a French financial conglomerate, in 1999).

We learn about other glamorous balls and see where they fit into the society of the time. The details of equestrian sports, which James Hazen Hyde found far more interesting than the nuts and bolts of life insurance, are well described -- including the high cost of pursuing the pastime.

One New York Times article that Beard cites, "The 'Gentleman Farmer' Fad: Well-Known Young Bachelors in New York Society Who Have Gone in for Rural Delights," seems like something pulled from this week's Sunday Styles section, trucker hats and all. The story is ultimately that current, because scandal is timeless.

Like many a Rigas, Grubman, or Scrushy after him, Hyde's temptation to mingle the personal and the professional in conflicting ways plays out in this book. What we're left with is an enjoyable story about Gilded Age social life, a reminder of just how entangled businesses were at the turn of the century, and the universal tragedy of a poor little rich boy.

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